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Answered: - MGT411 (Money & Banking) Semester 2016 Marks: 10 Define Risk and
MGT411 (Money & Banking)
Semester 2016
Marks: 10
- Define Risk and Variance?
- A person purchases an asset for $2000. There is the possibility that the value of this asset may fall to $1700 or rise to $2400. The probability of rise and fall is the same. This information can be presented in a tabular form as:
Investment : $2000 | ||
Possibilities | Probability | Pay Off |
Fall | 1/2 | $1700 |
Rise | 1/2 | $2400 |
How much risk is involved in this investment? Explain your answer by calculating Variance. Calculation must consist of all the steps.
Discuss the following topics:
- Coupon Bonds
- Zero Coupon Bonds
Instructions:
- This assignment covers 9 to 14 lectures.
- Use 12-point font size in Times New Roman.
- Show all the necessary calculations.
- Upload your assignment with in due date and time. No assignment will be accepted after the due date and time.
- No credit will be given to copied assignments.
Step 1:
Compute the expected value
Investment : $2000
Possibilities
Probability Pay Off Payoff ? Probability
Fall
1-Feb
$1,700
(1/2) ? $1700= $850
Rise
1-Feb
$2,400
(1/2) ? $2400=...
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STATUSAnswered
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DATE ANSWEREDOct 07, 2020
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